Bubble Meter is a national housing bubble blog dedicated to tracking the continuing decline of the housing bubble throughout the USA. It is a long and slow decline. Housing prices were simply unsustainable. National housing bubble coverage. Please join in the discussion.

Thursday, September 11, 2008

Fannie and Freddie: A Lot Has Changed in 6 Months

Six months ago, Fannie Mae and Freddie Mac were supposed to be the saviors of the housing market. Congress even placed them at greater financial risk by raising the conforming loan limit, so they could help rescue the California housing market. These housing market superheroes don't look so super anymore.

The seizure of Fannie and Freddie is all the more surprising because, as recently as late March, Washington viewed the companies as saviors of the housing market and the economy, rather than as risks to them. Instead of requiring Fannie and Freddie to scale back, regulators gave them a green light to buy and guarantee more and bigger mortgages.

On March 19, James B. Lockhart, their chief regulator, dismissed swirling rumors about their financial health. “The actions we’re taking today,” Mr. Lockhart declared, referring to a decision to ease restrictions on how much capital they were required to hold, “make the idea of a bailout nonsense in my mind. The companies are safe and sound, and they will continue to be safe and sound.”

Bubble Meter knew better, but we don't even get paid for this. Why are the professionals so clueless?

Yes, and in July 2008, the U.S. government passed a huge housing bill, pushed through by GSE balance sheet concerns, which raised the conforming limit again to $US 625,000. That was just two months ago, when Paulson reiterated that the new authorization for Treasury lending or purchasing of equity in the GSEs was all-but a pipe dream - for emergencies only! I guess that emergency came and went.

By the way, I like your blog and have added you to my blog roll. If you like my material, will you also add me?

Then why does the Republican base cheer so wildly when people like Mitt Romney, Rudy Giuliani, and Sarah Palin express contempt for the Bill of Rights? Why are true patriots like Ron Paul shunned by the Republican base?